Correlation Between Shanghai Commercial and Yuanta Financial

Can any of the company-specific risk be diversified away by investing in both Shanghai Commercial and Yuanta Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Shanghai Commercial and Yuanta Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanghai Commercial Savings and Yuanta Financial Holdings, you can compare the effects of market volatilities on Shanghai Commercial and Yuanta Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Shanghai Commercial with a short position of Yuanta Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Commercial and Yuanta Financial.

Diversification Opportunities for Shanghai Commercial and Yuanta Financial

0.41

Correlation Coefficient

Shanghai Commercial  Yuanta Financial

Very weak diversification

The 3 months correlation between Shanghai and Yuanta is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Commercial Savings and Yuanta Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta Financial Holdings and Shanghai Commercial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Shanghai Commercial Savings are associated (or correlated) with Yuanta Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta Financial Holdings has no effect on the direction of Shanghai Commercial i.e., Shanghai Commercial and Yuanta Financial go up and down completely randomly.

Pair Corralation between Shanghai Commercial and Yuanta Financial

Assuming the 90 days trading horizon Shanghai Commercial Savings is expected to generate 0.96 times more return on investment than Yuanta Financial. However, Shanghai Commercial Savings is 1.04 times less risky than Yuanta Financial. It trades about 0.24 of its potential returns per unit of risk. Yuanta Financial Holdings is currently generating about 0.05 per unit of risk. If you would invest  3,960  in Shanghai Commercial Savings on December 31, 2024 and sell it today you would earn a total of  575.00  from holding Shanghai Commercial Savings or generate 14.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Shanghai Commercial Savings  vs.  Yuanta Financial Holdings

Shanghai Commercial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Commercial Savings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Shanghai Commercial showed solid returns over the last few months and may actually be approaching a breakup point.

Yuanta Financial Holdings

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta Financial Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yuanta Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Shanghai Commercial and Yuanta Financial

The main advantage of trading using opposite Shanghai Commercial and Yuanta Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Commercial position performs unexpectedly, Yuanta Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Yuanta Financial will offset losses from the drop in Yuanta Financial's long position.

The idea behind Shanghai Commercial Savings and Yuanta Financial Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .